Another Look

Minefield plus barbed wireLast May we wrote about the tough road ahead for Tom McKillop, the CEO of AstraZeneca, the newly merged Swedish-British pharmaceutical giant ("AstraZeneca: can the drug merger work?"). Investors were underwhelmed by the combination from the time it was announced in December 1998. One major problem: the looming threat of patent expiry on its most popular remedy, the antiulcer drug omeprazole, sold as Losec (in the U.S. as Prilosec). It was the world's largest-selling drug in 1999, with global sales of $5.6 billion, around 40% of AstraZeneca's total revenues. But its patent protection in the U.S. will end next year; in the rest of the world, in 2002 or 2003.

To deal with the problem, last December the company announced a new patented remedy, Nexium, as a successor to Losec. AstraZeneca's public relations chief, Chris Majors, will say only that Nexium is substantially more effective than Losec. As we go to press, the company has plans to release technical papers detailing Nexium's efficacy to the medical profession at the end of May. Nexium has already been approved for sale in Sweden and will go on the market there in July.

Is Nexium a significant enough improvement on Losec to give it a chance to reach sales levels near those of its predecessor? "We see Nexium as a significantly better product than Losec or Prilosec but not sufficiently different to be classified as a new remedy," says Jo Walton, a pharmaceuticals analyst at Lehman Brothers in London. Walton predicts that annual sales of Nexium could reach $3 billion annually once Losec's patent protection finally runs out. In the meantime, AstraZeneca has filed patent infringement suits in several countries challenging competitors' plans to sell a generic version of Losec.

Investors seem to be warming up to AstraZeneca, albeit slowly: since the story appeared last May, the company's shares are up 13% (5% in dollar terms).

-Richard Heller

Silent treatment A year ago we argued that the U.S. federal government had overreacted when it sentenced the computer hacker Kevin Mitnick, 36, to five years in jail--more time than most plea-bargaining killers serve ("Kevin Mitnick, the hackers' first martyr"). Now that Mitnick has served the five years and is out on supervised release, the government isn't letting go. In April Mitnick's parole officer ordered him to stop freelance writing or speaking publicly. The convoluted reasoning: Mitnick had agreed as a condition of his release not to consult on computer-related activity.

"It's a complete abrogation of my First Amendment right of freedom of speech. I'm being denied the right to make a living if I just talk about technology," Mitnick says from his home in Ventura, California. How does the government expect him to earn a living? "They suggested I go get a job at Arby's [a fast-food restaurant]," Mitnick says. A parole office spokesman declares: "We're not going to let him touch a computer. He's got to find himself an eight-hour-a-day job."

-Susan Adams

Still waiting Fifteen months ago we poured cold water on the professed ambitions of Christian Haub to turn around the troubled A&P grocery store chain ("A&P"). "We are not saying 'Trust us,'" Haub told us at the time. "We will show you. The only thing that matters now is results."

We're still waiting. In mid-March, Haub, who is a scion of the German billionaire family that owns 53% of the company, unveiled the second phase of his Project Great Renewal, which entailed spending $250 million on new computer equipment.

Then it became clear that the cost of the system would cause the company to undershoot analysts' forecasts. The stock of the parent company, the Great Atlantic and Pacific Tea Co., dropped from over $21 in mid-March to $18.25 on May 8. The shares are down 43% since last May, compared with a 27% decline for the S&P index for food retailers in the same period.

A&P's great renewal project will have to be a genuine makeover if Haub is to succeed in turning the company around.

-Justin Doebele

In our issue of "Apr. 20, 1998", we expressed doubt about the need for a mayor of London; the city had prospered since Margaret Thatcher abolished the Greater London Council in 1986. Tony Blair, the Labour prime minister, thought otherwise. On May 4 he got his comeuppance when a left-winger, Ken Livingstone, was elected mayor, an outcome Blair warned voters would be a "disaster." As we said two years ago, "When you create an extra layer of bureaucracy, there's no telling where the damn thing might go."